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China Warns of Retaliation After Trump Threatens Fresh Tariffs

China on Friday said it would not be blackmailed and warned of retaliation after US President Donald Trump vowed to slap a 10% tariff on $300 billion of Chinese imports from next month, sharply escalating a trade dispute between the world’s biggest economies.
Trump on Thursday stunned financial markets by saying he plans to levy the additional duties from Sept. 1, marking an abrupt end to a truce in a year-long trade war that has slowed global growth and disrupted supply chains, Reuters reported.
Beijing would not give an inch under pressure from Washington, Chinese Foreign Ministry spokeswoman Hua Chunying said.
“If America does pass these tariffs then China will have to take the necessary countermeasures to protect the country’s core and fundamental interests,” Hua told a news briefing in Beijing.
“We won’t accept any maximum pressure, intimidation or blackmail. On the major issues of principle we won’t give an inch,” she said, adding that China hoped the United States would “give up its illusions” and return to the right track of negotiations based on mutual respect and equality.
Trump also threatened to further raise tariffs if Chinese President Xi Jinping fails to move more quickly to strike a trade deal.
The newly proposed wave of duties would extend Trump’s tariffs to nearly all of the Chinese goods that the United States imports.
Trump made his threat in a series of Twitter posts after his top trade negotiators briefed him on a lack of progress in US-China talks in Shanghai this week.
The president later said if trade discussions fail to progress he could raise tariffs further—even beyond the 25% levy he has already imposed on $250 billion of imports from China.
Senior Chinese diplomat Wang Yi told reporters on the sidelines of an Association of Southeast Nations event in Thailand the additional tariffs were “not a correct way” to deal with the bilateral dispute.
“Additional tariffs are definitely not a constructive way to resolve economic and trade frictions,” he said.

Hit Markets Hard

The news hit US financial markets hard. On Friday, Asian stocks took a battering and the safe-haven yen jumped as investors rushed for cover.
Oil prices plummeted 7%, with Brent crude registering the biggest daily percentage drop since February 2016. The benchmark S&P 500, which had been in solidly positive territory on Thursday afternoon, closed down 0.9%. Benchmark US Treasury yields also fell.
Retail associations predicted a spike in consumer prices. Target Corp tumbled 4.2%, Macy’s Inc fell 6% and Nordstrom Inc was down 6.2%.
Asked about the impact on financial markets, Trump told reporters, “I’m not concerned about that at all.”
Moody’s said the new tariffs would weigh on the global economy at a time when growth is already slowing in the United States, China and the eurozone.
The tariffs may also force the US Federal Reserve to again cut interest rates to protect the US economy from trade-policy risks, experts said.

Chinese Retaliation

Possible retaliatory measures by China could include tariffs, a ban on the export of rare earths and penalties against US companies in China, analysts say.
So far, Beijing has refrained from slapping tariffs on US crude oil and big aircraft, after cumulatively imposing additional retaliatory tariffs of up to 25% on about $110 billion of US goods since the trade war broke out last year.
China is also drafting a list of “unreliable entities”—foreign firms that have harmed Chinese interests. US delivery giant FedEx is under investigation by China.
“China will deliver each retaliation methodically, and deliberately, one by one,” ING economist Iris Pang wrote in a note.
“We believe China’s strategy in this trade war escalation will be to slow down the pace of negotiation and tit-for-tat retaliation. This could lengthen the process of retaliation until the upcoming US presidential election,” Pang said.

Frustrated

US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin briefed Trump on their first face-to-face meeting with Chinese officials since Trump met Xi at the G20 Summit at the end of June and agreed to a ceasefire in the trade war.
“When my people came home, they said, ‘We’re talking. We have another meeting in early September.’ I said, ‘That’s fine, but until such time as there’s a deal, we’ll be taxing them,” Trump told reporters.
A source familiar with the matter said Trump grew frustrated and composed the tweets shortly after Lighthizer and Mnuchin told him China made no significant movement on its position.
Previous negotiations collapsed in May, when US officials accused China of backing away from earlier commitments.